Ownership Affect Wrongful Termination Claims
Wrongful termination lawsuits aren’t usually the first thing on a business owner’s mind. But, a suit is ultimately determined not by an employer’s intentions but by the company’s actions. As such, even if you had no ill intent when firing an employee, your actions could be construed as illegal by a jury. And, the consequences of an unjustified termination can be costly.
The best way to avoid wrongful termination claims is to be careful not to make any promises to employees either verbally or in writing that employment will be permanent, protected, or guaranteed. Such a promise can be considered an implied contract and may render your business liable for wrongful termination if it is not fulfilled.
However, avoiding contracts won’t protect your business from every potential wrongful termination claim. For instance, if you hire an employee on a five-year sales contract with specific sales goals attached to it, then your company is legally bound to retain that employee until the goals are met, regardless of who owns the company at the time. If you terminate that employee before the five years is up, then you may be subject to a wrongful termination suit.
How Does a Change in Ownership Affect Wrongful Termination Claims?
In addition to potential legal fees and punitive damages, you may be required to pay your former employee for any out-of-pocket expenses associated with finding a new job after they are wrongfully fired. This includes lost wages, transportation and hotel accommodations if they traveled to multiple locations for interviews, and membership costs for professional associations, among other things. According to Nolo, these expenses can add up quickly and put your business in financial jeopardy.
Lastly, you should be prepared to pay your former employee compensation for emotional distress and mental suffering caused by the termination. This may include the time and energy they spent on their job search, the stress of being rejected by other employers, and any other physical or emotional toll that they experienced that was a direct result of your wrongful discharge.
Wrongful termination cases can be expensive and stressful for both the employee and the business. To help mitigate some of the risk, you can purchase an insurance policy that specifically covers employment practices liability. EPLI policies can cover the cost of defending a wrongful termination claim as well as any settlement or awards you would be required to pay an aggrieved employee.
Wrongful termination remains a pervasive issue in the realm of employment law, posing significant challenges for both employees and employers alike. As such, it’s crucial to delve deeper into the various facets and implications of wrongful termination, exploring its broader impact on individuals, organizations, and the legal landscape.
To learn more about purchasing a EPLI policy, contact us. Our knowledgeable team can answer any questions you have and help you to find the right coverage for your needs. We also offer other types of business insurance, including commercial general liability and professional liability. Contact us today to get started.
